The winds of change are blowing in Malaysia, as the government is taking on an ambitious agenda of structural reform. The objective is to climb up the income ladder and join the league of high-income economies. This is a difficult challenge – one which not many countries have successfully met in the post-war period.

Against this backdrop, the World Bank’s launch of a new report on the Malaysian economy (full disclosure: I lead the team who authors the report) is timely. The Malaysia Economic Monitor, which will be published twice a year, aims to provide context to the challenges facing Malaysia and serves as a platform for discussion and the sharing of knowledge.

Almost like an audience-customized appendix to the World Bank's East Asia and Pacific Update November 2009, the live online chat held last Thursday by the regional Chief Economist, Vikram Nehru, and the lead author of the report, Ivailo Izvorski, answered a good number of questions in detail.

The World Bank’s latest economic assessment of developing countries in the East Asia and Pacific region, released a week ago, came to some interesting conclusions and attempted to answer a lot of questions on a complex subject. Notably, the report’s authors pointed to the major role China has played in the region’s swift rebound from the crisis.

As part of its regular monitoring of the corporate sector in Southeast Asia, the World Bank economic team I am part of in Thailand has been working on a short case study of supply chains of Japanese multinational companies (MNCs) in the electrical and electronics (E&E) industry. We wanted to hear directly from firms about how the crisis affected them, how they were able to adjust so quickly to the drop in demand, what the rebound looked like, and what were the prospects going forward to upgrade along the value chain. I have learned a great deal from these interviews, and have become convinced that supply chains are central to understanding the current crisis in Thailand and East Asia more generally.

Some facts: the crisis had a disproportionate impact on manufacturing. In Thailand, manufacturing represents about 40 percent of GDP, but contractions in manufacturing value added have accounted for about 75 percent of the contraction of headline GDP. Within manufacturing, the auto and E&E industries account for the bulk of the contraction. Most of the output in those industries is exported, and more than three-fourths of the decline in Thai exports during the crisis was due to falls in shipments from the auto and E&E industries. My conclusion is that the magnitude of the crisis in Thailand has been driven primarily by these two industries.

The investment climate is the fundamental socio-economic framework in which firms operate – the macroeconomic and trade policies they face, the labor and financial markets in which they recruit and raise money, the available infrastructure and imposed regulations, as well a

Internet usage in China continues to grow, and the latest figures released by the Chinese government’s Web research organization show that the total number of online users, at 338 million, surpasses the population of the United States. The impressive statistics – which reflect a 13.4 percent jump from 2008 – had a number of blogs and news sites buzzing late last week. The full report is available in Chinese here (pdf), and WSJ’s China Journal blog has a nice roundup of the findings in English here.

The growth in China – and the rest of East Asia and the world for that matter – is nothing new. Last year, we shared 2008 comScore statistics showing Asia’s internet audience growing faster than all other regions worldwide. And according to more recent information from comScore, the Asia-Pacific region has the highest global share of internet users, at 41 percent (although it’s important to note that the penetration rate of the region is only around 17 percent of the population – well below most other regions – according to this web stats site).

We’ve seen that increased connectivity through mobile phones and the internet may lead to improved economic growth, job creation and good governance, as well as other activities like mobile banking. And as more people, particularly in developing countries, get connected, this growth trend clearly seems to be a positive one.